MarketView for January 15

Summary

Stocks rose on Wednesday, with the S&P 500 climbing to an all-time closing high after strong earnings from Bank of America and the day’s economic data indicated that the economy continues to improve. As a result, Bank of America ended the day up 2.3 percent to close at $17.15 after stating that its quarterly earnings number increased by nearly $3 billion on higher revenue. The report came a day after both JPMorgan Chase and Wells Fargo also released better-than-expected earnings, although Wells Fargo's mortgage lending slowed to the lowest level in five years.

In the latest economic data, the seasonally adjusted Producer Price Index rose 0.4 percent last month; the largest increase since June, although inflation pressures remained benign. The Federal Reserve Bank of New York's "Empire State" index of general business conditions climbed to its highest level in 20 months.

The data reassured investors and analysts alike that the economy is able to stand on its own even as the Federal Reserve begins to slow its massive stimulus programs, which contributed to huge equity gains in 2013. Wall Street's rally on Wednesday erased some of 2014's early weakness, putting the S&P 500 near the break-even level for the year.

In its latest Beige Book report on business activity, the Fed said the economy grew at a moderate pace from late November through the end of 2013, with some regions of the country expecting a pickup in growth.

Apple closed up 2 percent to $557.36 a day after Chief Executive Officer Tim Cook said the company's deal with China Mobile would help it build on its momentum in the country. This was the third straight day of gains for the tech giant, and it is up 4.6 percent over that period.

Trading will probably be driven by earnings as the season continues. With only 5 percent of the S&P 500 having reported results so far, 52 percent of companies have topped earnings expectations, according to Thomson Reuters data, a rate that is below the historical average of 63 percent.

After the closing bell, CSX reported fourth-quarter earnings and revenues that were slightly below expectations sending the shares down 2.1 percent in extended-hours trading. CSX ended the regular session at $29.23, up 1.2 percent.

During regular trading, Tesla Motors rose 1.8 percent to close at $164.13. The stock's advance came a day after the electric car maker said that deliveries of its Model S sedan in the fourth quarter sharply exceeded what the company had forecast.

SolarCity gained 4.5 percent to close at $68.50 after the top solar installer unveiled a plan to let investors, including individuals, invest in its rooftop solar systems.

Shares of Chelsea Therapeutics rose sharply after an advisory panel to the U.S. Food and Drug Administration concluded on Tuesday that the company's drug to treat a rare form of low blood pressure is effective enough to warrant regulatory approval. The stock ended the day up 91.7 percent at $4.41.

On the downside, the stock of Fastenal fell 4.5 percent to $46.06 and ranked as the S&P 500's biggest loser after the company reported fourth-quarter earnings below expectations.

Approximately 5.95 billion shares changed hands on the major equity platforms, according to BATS exchange data.

Producer Price Index Rises

A report by the Labor Department on Wednesday morning indicated that its seasonally adjusted producer price index rose 0.4 percent last month, the largest rise since June, after slipping 0.1 percent in November. December’s rise was the largest increase in six months as the cost of gasoline rebounded strongly. Nonetheless, inflation pressures remained benign.

December's rise in prices received by the nation's farms, factories and refineries ended two straight months of declines and matched Street expectations. Looking at the 12 months through December, producer prices increased 1.2 percent after advancing 0.7 percent in November.

Wholesale prices excluding volatile food and energy costs increased 0.3 percent, the biggest gain since July 2012, after ticking up 0.1 percent the prior month. However, tobacco accounted for nearly half the increase.

In the 12 months through December, the so-called core PPI rose 1.4 percent after increasing 1.3 percent in November.

While economic activity has picked up, inflation continues to run very low because of labor market slack. That could see the Federal Reserve keeping interest rates near zero for a while. The Fed has started scaling back its monetary stimulus, reducing its monthly bond purchases to $75 billion from $85 billion starting this month.

The Fed's policymaking group meets on January 28-29.

Consumer inflation data Thursday is expected to show prices rising in December, according to a Reuters survey. Still, inflation remains below the Fed's 2 percent target.

Last month, wholesale gasoline prices rose 2.2 percent, accounting for more than half of the increase in the energy index, which was up 1.6 percent.

Wholesale food prices fell 0.6 percent in December after being flat the prior month. Food prices were held down by the cost of pineapples, which recorded their biggest drop since May 2006. Pork prices also weighed, dropping by the most since September 2012.

Tobacco prices rose 3.6 percent. Passenger car prices, which rose 0.2 percent, and light truck prices, which advanced 0.5 percent, also helped to lift the core PPI.

Fed Says Economy Improving

The economy continued to grow at a moderate pace from late November through the end of 2013, with some regions of the country expecting a pick-up in growth, the Federal Reserve indicated on Wednesday via its Beige Book..

According to the Beige Book report of anecdotal information on business activity collected from contacts nationwide, the Fed is of the opinion that two-thirds of the 12 districts reported saw increases in hiring.

"The economic outlook is positive in most districts, with some reports citing expectations for 'more of the same' and some expecting a pick-up in growth," the report said.

The findings, compiled by the Federal Reserve Bank of Boston from data collected on or before January 6, were broadly in line with economic data ranging from consumer spending to industrial production that have showed a building up of strength in the economy in late 2013.

The report of increased hiring supports views that a sharp slowdown in job growth in December was the result of cold weather that gripped the country nation during that month.

While the Fed said the real estate market continued to improve, it noted a few districts had reported that home sales or residential construction had slowed or declined in recent months.